One of the readers here kindly reminded me, the OCC has released their quarterly report. This is the agency that tracks the growth and movements of the Derivatives Beast! One would imagine, over the years, the media screaming and shouting each time this report appears. I know, I scream. Well, the latest report is VERY interesting: Goldman Sachs did a lot of derivatives business with an unknown entity that flies by the name A—I—G. Well, we see something very fishy going on in the OCC records!

First, here is an anonymous blogger giving what I believe, is good, solid insider information from Goldman Sachs:

During Jan/Feb AIG would call up and just ask for complete unwind prices from the credit desk in the relevant jurisdiction. These were not single deal unwinds as are typically more price transparent – these were whole portfolio unwinds. The size of these unwinds were enormous, the quotes I have heard were “we have never done as big or as profitable trades – ever“.

As these trades are unwound, the correlation desk needs to unwind the single name risk through the single name desks – effectively the AIG-FP unwinds caused massive single name protection buying. This caused single name credit to massively underperform equities – run a chart from say last September to current of say S&P 500 and Itraxx – credit has underperformed massively. This is largely due to AIG-FP unwinds.

I can only guess/extrapolate what sort of PnL this put into the major global banks (both correlation and single names desks) during this period. Allowing for significant reserve release and trade PnL, I think for the big correlation players this could have easily been US$1-2bn per bank in this period.“

I do say, such massive moves would appear somewhere, wouldn’t they? As I pondered this story from this morning, the OCC report crossed my computer screen and I always rush down to the graphs and charts to see what has unfolded and this caught my eye instantly and I jumped up and yelled, ‘Holy Handgrenades, King Arthur! Look at Goldman Sachs!’

What the hell is going on here? Since the OCC has begun tracking the Derivatives Beast’s monstrous growth, Goldman Sachs barely showed! JP Morgan holds, by far and away, the most derivative contracts to the tune of, get this, nearly $90 TRILLION. This is, any way one looks at it, an obscene sum of money!

Well, this graph shows GS suddenly involved in so much risk, this is like having an orgy with Miz Risky in the Cave of Wealth and Death! Whoowee! Over 1,000% growth in risk? What the hell happened? Why wasn’t this in the news? In general, everyone else’s risk based exposure grew less frantically or only about as frantically as in the previous 6 quarters which is the length of this financial tornado of destruction.

Let’s go to the next graph that shows losses on these goofy, stupid derivatives that were supposed to protect the financial system from losses: OOPSY! Off the cliff!

This is very, very, very bad. Couple this with the earlier graph I hauled out of the St. Louis Fed showing Bernanke’s helicopter just dumped enough fiat funny money into the banks that it doubled the amount of money floating around. A 350+% drop so far. And the amount is more than double two earlier downturns.

Yikes, again! Why isn’t this being talked about in Congress? On the talking TV shows where cute chicks with lots of eye make-up chirp along merrily, tossing their silky hair, jiggling their tits? Why aren’t they discussing this? HAHAHA. Perish the thought.

Then there are the gnomes on TV. Like the odious Cramer. Why isn’t he snarling and snapping at the pretty girls, demanding to know, who was the clown who devised this system and then let it fall completely apart? Ooops. Mirror time! No, like all crooks, everyone who enabled this or works for enablers are silent about the Derivatives Beast. This monster is still actively destroying the entire world financial systems and hardly anyone knows it! Gads!

No wonder Geithner is in hysterics, trying to see if outright lying about the value of holdings will stop the derivatives from being swapped, swamped and sloshed all over the place. With enough hocus pocus, the wizards will be able to make this thing invisible again. I suppose, seeing how all the systems I love to track, getting shut down or put behind curtains so I can’t see them anymore, this will happen to the OCC reports about the Derivatives Beast. Suspicion is the road to wisdom here.

Continued turmoil in credit markets has led to deterioration in derivatives-related and loan credit metrics. NO KIDDING!!!! The fair value of derivatives contracts past due 30 days or more totaled $363 million, up $302 million from the third quarter. OMG! The counterparties that are supposed to pay are NOT paying at all! They are going BANKRUPT or are being arrested for running Ponzi schemes and other obvious frauds! Past due contracts were 0.05% of net current credit exposure in Q4, up from 0.01% in the third quarter. In other words, it grew in leaps and bounds! During the fourth quarter of 2008, U.S. commercial banks charged-off a record —U repeat this: A RECORD—-$847 million in derivatives receivables, or 0.10% of the net current credit exposure from derivative contracts, up from the 0.02% in the prior quarter. The frightful mess that caused Geithner, Obama and Goldman Sachs and JP Morgan and CItibank to have that Oval Office meeting where they yelled at each other, was due to this news! A mere $1 trillion of the Derivatives Beast showing up on the books is causing hysteria! And that is only one tenth of one percent? WOW! This is like, pennies compared to dollars! For comparison purposes, Commercial and Industrial (C&I) loan net charge-offs rose to $5.5 billion from $3.0 billion and were 0.4% of total C&I loans for the quarter, nearly double the ratio of the third quarter.

Yes compare the impossible, insane numbers of the Derivatives Beast with anything makes the jaw drop. The only thing we can compare it to, are the stars, distant galaxies and the size of the universe. The low incidence of charge-offs on derivatives exposures results from two main factors: 1) the credit quality of the typical derivatives counterparty is higher than the credit quality of the typical C&I borrower; and 2) most of the large credit exposures from derivatives, whether from other dealers, large non-dealer banks or hedge funds, are collateralized on a daily basis. HAHAHAHA. That’s right! No more ‘mark-to-market’ stuff, either. A certain counterparty, the US taxpayer, is now the collateral for all this! So the entire massive, oozing, disgusting puss-filled sack of horror hasn’t popped. It is just destroying our nation, our currency, our future and all physical things but NOT Goldman Sachs! Whoopee. Or JP Morgan! Even the evil mess that is Citibank, is limping along, sucking down immense sums as we saw on the Federal Reserve money graphs this morning.

Collateralized debt obligations (CDOs) are a type of structuredasset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets. CDOs are assigned different risk classes, or tranches, whereby “senior” tranches are considered the safest securities. Interest and principal payments are made in order of seniority, so that junior tranches offer higher coupon payments (and interest rates) or lower prices to compensate for additional default risk.

Credit derivatives have grown rapidly over the past several years as dealers increasingly used them to structure securities to help meet investor demand for higher yields. From year-end 2003 to 2008, credit derivative contracts grew at a 100% compounded annual growth rate. However, in the fourth quarter of 2008, reported credit derivatives notionals declined 2%, or $252 billion, to $15.9 trillion, reflecting the industry’s efforts to eliminate many offsetting trades….

ANYTHING growing at 100% is a CATASTROPHE. This is the very definition of a bubble. I keep saying, how on earth has the OCC sat on this information and not run around, screaming, ‘This is the world’s nastiest and biggest bubble! OMG! We are all DOOOOOMED!’ No, not a peep.

The notional amount of derivatives contracts held by U. S. commercial banks in the fourth quarter increased by $24.6 trillion, or 14%, to $200.4 trillion. Derivative notionals are 21% higher than a year ago.

Damn. The stupid Beast is still growing! It is NOT shrinking at all. And guess what? We are feeding the damn thing. AIG is the funnel that feeds into this monster that is STILL GROWING BIGGER. Just 5 US banking entities hold over $200 trillion in these things that no one seems to understand except maybe the many dire demons and denizens who live in the Cave of Wealth and Death. Nothing on earth grows at a 21%+ rate, either, this is STILL bubble-bubble-toil-and-trouble witches brew land!

Leaders of advanced and emerging economies are closing ranks behind plans for tougher rules on financial markets to prevent another collapse like the one that wiped out much of Wall Street.

About 20 years too late and obviously, will be too little, too.

A global approach to regulation has been gaining momentum ahead of the Group of 20 summit April 2 in London. U.S. PresidentBarack Obama, U.K. Prime MinisterGordon Brown and their G-20 counterparts aim to merge their national blueprints for strengthened regulation into a united front to rein in hedge funds, derivatives trading, executive pay and excessive risk- taking by financial firms.

Why didn’t these clowns rein in the derivatives trading BEFORE they grew it from $1 trillion in size to over $600 trillion? What on earth? And we have known now for a long time, it is a very destructive monster! Why not arrest all who created and fed this and this will STOP them for they just made it grow another 14% in the last QUARTER.

At this rate, it will grow another 60% or more, this entire year!!!! So it will be in the Quadzillions! This is impossible. I refuse to allow this. Arrest them all! Geeze.

“There is reason for optimism that progress toward stronger global regulation has begun,” says Daniel Price, who was President George W. Bush’s G-20 negotiator and is now senior partner for global issues at Sidley Austin LLP in Washington. “We’re beginning to see the outlines of a convergence.”

My god, NOW they can see the Derivatives Beast they nurtured and protected? This man is either a total fool or more likely, one of the criminals.

Agreement on a shared regulatory agenda would provide the G-20 summit with a measure of success even as leaders remain at odds over trade policy, fiscal stimulus and the status of the dollar. A joint regulatory approach is crucial to prevent investors from seeking out markets with the most permissive rules, setting off a race to the bottom as countries vie to attract capital.

Despite all this, the core issue is trade! If we don’t balance our trade, our country will be reduced to third world status. Killing the unions won’t make us richer, safer or more powerful anymore than killing all our social programs will make us superheroes and superrich.

Dutch NXP Semiconductors [NXP.UL], struggling with a $5.96 billion debt burden and falling sales, said on Tuesday it had cut its debt by about $465 million in a debt-swap restructuring deal.

But bondholders who did not take up the offer to swap existing debt for more highly ranking secured notes have repeated their call for a wider restructuring of the company’s debts, saying the low take-up of the exchange makes it more likely further action is needed to reduce NXP’s debts.

NXP is exchanging $420 million and 131 million euros ($174 million) of senior bonds into $90 million and 29 million euros of new notes, the company said in a statement….

Many bondholders believe the value of the company is now less than its outstanding debt, the source said, meaning any restructuring must involve a contribution from the company’s shareholders, either in the form of a cash contribution or a debt-for-equity swap.

I am including this story to illustrate the noxious mess created by hell hounds and pirates. Everything is struggling under a huge burden of debt. Those who have access to money are paying down debts like mad because they can’t carry the debt on the books in a declining ZIRP banking system, this is double jeopardy for them. This is why they are firing people like crazy so they can pay down loans. While this devolution is part of the grinding depression mess, the Derivatives Beast continues to DOUBLE in size nearly EVERY YEAR!

24 responses to “THE DERIVATIVES BEAST AND GOLDMAN SACHS”

What i never understood was why the notional values were always so astronomical. It was like you could insure your $100.000 dollar property for $10 million. It was easy to see the counterparty would never pay.

THERE IS NO NEWS AND NO EXPLANATION OF THIS BUSINESS AT ALL. Throughout this last 5 years, I have grown more and more upset and annoyed with the Derivatives Beast and far from understanding this process, it gets murkier all the time. The only news I do get is a bunch of lying bastards claiming, no one but AIG and the pirates understand this monster!
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Well, I say, anything that doubles in size every effing year is screwy as all hell and should be prevented and eliminated.

Sorry. Waaay off-topic. Don’t know where I saw the original article/whatever that brought this to my attention (onset of acute short-term memory loss!!), so I had to do a quick google on “GM crop failure”.
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South African farmers suffered millions of dollars in lost income when 82,000 hectares of genetically-manipulated corn (maize) failed to produce hardly any seeds.The plants look lush and healthy from the outside. Monsanto has offered compensation.
Monsanto blames the failure of the three varieties of corn planted on these farms, in three South African provinces,on alleged ‘underfertilisation processes in the laboratory”. Some 280 of the 1,000 farmers who planted the three varieties of Monsanto corn this year, have reported extensive seedless corn problems.”
“However Mayet says Monsanto was grossly understating the problem.According to her own information, some farms have suffered up to 80% crop failures. The centre is strongly opposed to GM-food and biologically-manipulated technology in general.
“Monsanto says they just made a mistake in the laboratory, however we say that biotechnology is a failure.You cannot make a ‘mistake’ with three different varieties of corn.’http://www.digitaljournal.com/article/270101
[Digital Journal, March 29, 2009]
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Plenty more where that came from, but this’ll do for now. Scary stuff.

they probably know that NOW is the time to buy insurance as everyones drunk on credit driving at a million miles an hour talking on thair cell phones
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doesnt make the world a safer place but hey, its smart money
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write you local builderburger group

http://www.foxnews.com/politics/2009/04/01/doj-sources-say-case-dropped-ex-sen-ted-stevens/
Justice Department Files Motion to Drop Case Against Former Alaska Sen. Ted Stevens
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i once knew a girl that embezzeld only 20k dollars ‘or so’ charging up her credit card, then using instatutional refunds to credit her account by creating fake ‘agreements’ tagged with her credit card that she canceled… so to sum it up she did a fantastic job except when she was lieing and stealing from the customers
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she had a 2yr old child single mother and got like 4yrs in prison or something
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its a totally different world at the top when you lie and steal from your customers

The London G20 meeting is looking likely to end in tears
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So it is that while the Bretton Woods meetings that set up the post war financial system lasted 22 days, the G20 will only meet for 4 and 1/2 hours. Unless some big changes come soon the G20 will issue a very disappointing statement vaguely calling for greater regulation of derivatives and papering over all the giant cracks. Many will call for a solution to be postponed until July. It is looking increasingly likely the world’s creditor nations will have to take the financial nuclear option and dump their treasuries while unilaterally converting their own US dollar holdings into a new currency.
.http://benjaminfulford.typepad.com/benjaminfulford/

From the Frau Blucher (Horses Whinny) and Frankenstein Department
and remember its “Fraaahnkensteeen” er Morganstein.
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Dr. Frederick Morganstein: “From that fateful day when stinking bits of slime first crawled from the sea and shouted to the cold stars, “I am man.”, our greatest dread has always been the knowledge of our mortality. But tonight, we shall hurl the gauntlet of science into the frightful face of death itself. Tonight, we shall ascend into the heavens. We shall mock the earthquake. We shall command the thunders, and penetrate into the very womb of impervious nature herself.”
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Dr. Frederick Morganstein: “Alive! It’s alive! It’s alive! ”
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Frau Blücher: Good night, Herr Broker.
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Dr. Frederick Morganstein: Good night, Frau Blücher.
[horses whinny]

david. is it true your landscape is littered with abandoned rich peoples boats where you live? if so, how can i get one to iowa really, really cheap? it looks like a profit opportunity gathering these up for resale sometime. start your own navy if nothing else. how much easier it would be to pick these up and move them to your woods than logging. could use same trucks, same equipment to pick them up? stack them on the logs you have sitting around waiting for a better market. free money!

i have a 24 foot gooseneck trailer and a 1 ton dually pickup. could even drive a semi down if you could find me a yacht somebody famous sweat on. heh. i could tow it to rathburn lake or something. put it in my pond even. live on it and annoy the hell out of my wife and kids by talking like a pirate all the time!

And just yesterday the Somali pirates took FIVE count em FIVE vessels in the Indian ocean. Well at least we are told by our governmental types that it was those dastardly somalis who nabbed the ships.
Of course it also says that the somalis don’t harm the crews or the cargos or the ships and eventually trade the crews and cargos back to the owners for piles of green american paper with Franklin’s picture on the front.
Could they not at least trade the vessels back for GOLD doubloons, or diamonds and emeralds and rubies, or spam and rye bread.

As our navy man said, it’s a real big ocean and the ships can’t be everywhere at once. He left out the part about the keyhole and other satellite assets that can see everywhere at once. So there really is no way that the pirates could not have been seen and what the navy can see it can usually lose track of unless it is an airliner full of civilians.